IRS Expansion

A:No. The law requires the IRS mostly to hand out tax credits, not collect penalties. The claim of 16,500 new agents stems from a partisan analysis based on guesswork and false assumptions, and compounded by outright misrepresentation.

FULL QUESTION

Can you explain if … the IRS will hire 16,500 new agents and spend $10 billion/year to audit who has [health care] coverage. I can not find any coverage that is not from the right on this … and I have been searching for a while. Thank you.

Hello,

I’d like to request a fact check on Ron Paul’s claim regarding the enforcement of the health insurance mandate, "16,500 ARMED bureaucrats coming to make this program work." at 3:53 of this video:

http://www.youtube.com/watch?v=w0lA6XCt3gM

I did a google search for "16,500" and there were a lot of hits on conservative websites stating something along the lines that the health care bill sets aside $10 billion for the IRS to hire up to 16,500 agents to enforce the mandate, but ARMED agents are another matter. Anyway, I couldn’t find anything about this from the national news outlets, so I’m just curious if this is just a scare tactic.

FULL ANSWER

This wildly inaccurate claim started as an inflated, partisan assertion that 16,500 new IRS employees might be required to administer the new law. That devolved quickly into a claim, made by some Republican lawmakers, that 16,500 IRS "agents" wouldbe required. Republican Rep. Ron Paul of Texas even claimed in a televised interview that all 16,500 would be carrying guns. None of those claims is true.

The IRS’ main job under the new law isn’t to enforce penalties. Its first task is to inform many small-business owners of a new tax credit that the new law grants them — starting this year — which will pay up to 35 percent of the employer’s contribution toward their workers’ health insurance. And in 2014 the IRS will also be administering additional subsidies — in the form of refundable tax credits — to help millions of low- and middle-income individuals buy health insurance.

The law does make individuals subject to a tax, starting in 2014, if they fail to obtain health insurance coverage. But IRS Commissioner Douglas Shulman testified before a hearing of the House Ways and Means Committee March 25 that the IRS won’t be auditing individuals to certify that they have obtained health insurance. He said insurance companies will issue forms certifying that individuals have coverage that meets the federal mandate, similar to a form that lenders use to verify the amount of interest someone has paid on their home mortgage. "We expect to get a simple form, that we won’t look behind, that says this person has acceptable health coverage," Shulman said. "So there’s not going to be any discussions about health coverage with an IRS employee." In any case, the bill signed into law (on page 131) specifically prohibits the IRS from using the liens and levies commonly used to collect money owed by delinquent taxpayers, and rules out any criminal penalties for individuals who refuse to pay the tax or those who don’t obtain coverage. That doesn’t leave a lot for IRS enforcers to do.

GOP Analysis, March 18: IRS may need to hire as many as 16,500 additional auditors, agents and other employees.

Notice the words "may" and "as many as." This is the highest figure the GOP analysts thought they could support. Notice also the phrase "other employees," which covers everyone down to file clerks and support staff.

The analysts based their 16,500 figure on an assumption that the IRS budget "could" require an additional $10 billion over the next 10 years as a result of the law, a figure they attribute to the Congressional Budget Office. But what CBO Director Douglas W. Elmendorf actually said in a March 11 letter to congressional leaders is this (with emphasis added):

CBO Director Elmendorf, March 11: CBO has not completed an estimate of all of the discretionary costs that would be associated with H.R. 3590. … [S]uch costs would probably include an estimated $5 billion to $10 billion over 10 years for administrative costs of the Internal Revenue Service (IRS).

Note the words "probably" and "could." And the figure — based on preliminary analysis — could as easily be $5 billion as the $10 billion number the GOP analysts used.

False Assumptions

The GOP analysts then inflated their estimate by making a couple of false assumptions.

No desks? First, they assume that all the new "administrative" spending projected by CBO would go for payroll and benefits — without any allowance for desks, computers, office rent, utilities, travel or other overhead costs necessary to run any government enterprise. The partisan analysts simply divided the spending (which they figured could be $1.5 billion per year once the law is fully effective) by the current average payroll cost for the entire IRS workforce.

To their credit, the GOP analysts admitted this shortcoming, saying their figure "does not include other costs that would be incurred, including office overhead." In fact, they said: "There would be some additional overhead costs for the new employees, such as computers and telephone services." Adjusting for that, they said, the number of new workers implied by the CBO guesstimate would be 11,800.

No pay raises? The second false assumption is that there will be no inflation or pay raises over the next decade. They apply fiscal 2009 cost figures to budgets for 2014 through 2019. In fact, CBO currently projects that the Employment Cost Index will rise 1.4 percent next year and reach 3 percent per year in 2015 and thereafter. Even if the partisan analysis is valid, that would further reduce the maximum number that could be hired by another 1,000 in 2014, and by about 2,800 in 2019, by our calculations.

The GOP analysts assume that the $10 billion would not be spread evenly over the decade, but would reach $1.5 billion annually in later years. That’s reasonable, given that major provisions of the new law don’t take effect until 2014. But even accepting that, the peak figure could just as easily be $750 million a year, if the CBO’s lower guess proves to be correct. So the number of new IRS workers implied by the GOP’s own logic could be closer to 5,000 than to 16,500, after adjusting for overhead costs and inflation.

And the fact is, whatever the number of new employees turns out to be, relatively few would be "agents" or otherwise working in enforcement.

Employees vs. "Agents"

The GOP staff analysis projected only the number of new "employees," but some Republican lawmakers immediately misrepresented the findings by claiming that all the new workers would be "agents." GOP Rep. Dave Camp of Michigan stated in a press release that "Up to 16,500 New IRS Agents" would be required. And he’s not the only one making such a claim. Republican Rep. Paul Ryan of Wisconsin said on "Fox News Sunday" on March 21 that the IRS would get "16,000 agents to police this new mandate." In a March 25 speech on the Senate floor, Republican Sen. John Ensign of Nevada said: "And 16,500 new IRS agents are going to be required to be hired because of the health care reform bill. Do we want IRS agents showing up at people’s houses, not only to audit them because of their taxes but because now they are not paying an individual mandate fine?"

But there’s a huge difference between an IRS revenue agent — who calls on taxpayers and conducts face-to-face audits — and the workers who make up the bulk of IRS employees. Those who work at the IRS include clerks, accountants, computer programmers, telephone help line workers and other support staff. In fact, IRS revenue agents make up only 15 percent of the IRS workforce, according to the official IRS personnel summary. It shows that of the 93,337 employees the IRS had on board as of the end of the last fiscal year (September 31, 2009) only 14,264 were actually working as revenue agents. Even adding in "revenue officers" (who collect money owed) and "special agents" (who handle criminal cases and are law-enforcement officers) the total working in the enforcement area comes to less than 25 percent of all IRS workers.

Not content to turn all IRS "employees" into "agents," one Republican lawmaker even claimed they all would have guns. In a March 22 interview with Fox Business anchor David Asmam, Rep. Ron Paul said, "Just think about it — 16,500 armed bureaucrats coming to make this program work." Rep. Paul’s wildly false claim appears 3 minutes and 51 seconds into the interview, which Fox posted on YouTube.

In fact, the only IRS employees who are authorized to carry firearms are "special agents," who are sworn law enforcement officers who work on criminal cases. As of last year there were only 2,725 of those, making up just under 3 percent of all IRS employees. So even if thousands of new IRS workers were actually hired, very few of them, if any, would be "armed bureaucrats."

In fact, as previously mentioned, the bill signed into law specifically waives any criminal penalties for individuals who refuse to obtain coverage and also refuse to pay the tax. It says (on page 131): "In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure."

Outreach vs. Enforcement

At his March 25 appearance, IRS Commissioner Shulman said that the bulk of the IRS’ efforts would go to informing individuals and businesses of the various tax incentives available under the new law. Under questioning from Democratic Rep. Ron Kind of Wisconsin, Shulman said: "What we’re going to do is try to make sure people are educated, there’s information, that we process payments quickly."

He said the IRS hadn’t yet figured out what staffing levels would be required, and he didn’t deny that some new agents might be hired. "We also will make sure there’s no fraud and abuse in the system as we always do," he said. "We will need resources to implement the tax provisions." But that scary claim of 16,500 new agents simply lacks any foundation in fact.

Update, Feb. 22: The Treasury Department on Feb. 14 released the IRS budget request for fiscal year 2012 that shows the agency is seeking 1,269 full-time equivalent employees (FTEs) at a cost of $473 million to help implement the Patient Protection and Affordable Care Act. That includes 291 IRS agents, most of them (193) to "ensure accurate delivery of tax credits." For more information, read our Ask FactCheck, "IRS and the Health Care Law, Part II."